Wall Street Traders Too Young To Remember Rising Interest Rates

A new report by Bloomberg shows that the average Wall Street trader is 30 years old. Given that:

30% of traders are so young they have NEVER experienced anything other than zero interest rates.

66% of traders have no adult memory of the dot-com crash of 2000.

Only 43% of traders are old enough to remember the 2000 dot-com crash and the 2007 credit crisis — the two most significant economic cycles of the last 15 years.

Simply put, the majority of humans responsible for trading -- or coding the algorithms that trade -- in our financial markets have very little experience doing so in an environment of rising interest rates. Or put another way, as interest rates begin to rise (as they must do for one reason or another), the traders in control of our system are uniquely unqualified. All their muscle memory has been developed with the tailwind of a liquidity-happy Fed at their backs. When that tailwind switches to a headwind...

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3 Comments

Interest rates are going up for corporations with weaker credit.Take a look at the EMC potential deal with Dell. The EMC bonds are off over 10%. As risk increases, rates increase (Argentina). So the Fed may be held at bay for some time as things unravel in front of them. The Gold ratio to Oil favors Oil, not Gold. Silver is an industrial metal and might work. The latest GMO forecast favors non dollar investments over the next 7 years like Timber and Emerging Markets. The strong dollar has crushed many of the International Industrial Economies. I see a weaker dollar by as much as 10% from here. Money goes where it is best treated. The REIT markets have been strong but many fully priced (QTS Realty Trust) . Walmart is a business model that does not work on higher wages. Amazon is a business model that does not make a profit yet. The Educated worker stock seems to have upside going forward. Looking forward KMI and POT seem to have potential. The Cold War that is taking place now seems to favor the inflation side and risk on for the old Industrials. The negative T-bill yield represents a very concerned Investor or one not willing to take any risk. Usually this is a buying opportunity for Risk Assets in my opinion. Bio-Tech equities are like zero coupon bonds, in a rising rate environment should be avoided. How high will interest rates go? Probably higher than you think. These are my thoughts only and do not represent Investment Advice. Please consult with your own Adviser and Tax Professionals. I am a Investment Advisor Rep and have over 30 years experience (yes I remember the rate rise cycles). I also remember when the Gold to Dow ratio was 1:1

Already Oil prices have tumbled in expectation of the rate hike because now the oil companies find it harder to repay the debt and many oil companies are on the verge of bankruptcy . Oil stocks have been tumbling over this week . The high yield bond market is spiking red because many companies are borrowing money to pay for the dividends and a rate hike could cause companies default on loan payments .The liquidity in the high yield bond market is declining so fast ,they can soon become insolvent . When the company that issued the high yield bonds go bankrupt and they take the bond value to zero .

........ Perhaps the most egregious crimes have been right under our own noses, where the elitists have been openly wiping the last crumbs of middle class wealth off the table and into their own pockets. You really think your retirement fund or pension money will be there when you retire? That’s laughable.

I’m still trying to sort out and understand the exact reason why the Fed decided to push up the Fed funds rate from zero to not-much-more-than-zero. What you might of missed is that the Fed raised the interest it is paying to the Too Big To Fail banks who have $2.4 trillion in cash given to them from QE that is earning interest in the Fed’s “Excess Reserve Account.” The rate was raised from .25% to .50%, effectively doubling the amount of free cash flowing into the banks from their Excess Reserve largesse. On the other side of this, consumer borrowing rates were immediately raised.

The only conclusion that can be reasonably drawn by the Fed’s move is that the noose described above – put in place quietly over and with no resistance over the last 15 years – is now being tightened.